Are there any tax accountants or lawyers here

[Girthang]

... that could answer this question-

Wouldn't a player being given money to attend and play at a school then also incur a tax liability also on his scholarship, since he should no longer be considered an amateur athlete and his schooling is dependent on his competing in athletics? This in essence makes him a professional, since it is his participation in a sport that makes him valuable for NIL (if said athlete has not generated fame and/or income from altruistic endeavors outside of sports). Even if a player now receives just 1500$ in compensation over and above scholarship money, they are considered an employee, are they not?

 

[SaltyCat22]

@MattJonesKSR what are your thoughts?

 

[THE_OAK]

Technically the school isn't paying his NIL, therefor he isn't an employee of the university, but he does have to pay taxes on his NIL money as it is a form of income.

 

[USMC Cat]

... that could answer this question-

Wouldn't a player being given money to attend and play at a school then also incur a tax liability also on his scholarship, since he should no longer be considered an amateur athlete and his schooling is dependent on his competing in athletics? This in essence makes him a professional, since it is his participation in a sport that makes him valuable for NIL (if said athlete has not generated fame and/or income from altruistic endeavors outside of sports). Even if a player now receives just 1500$ in compensation over and above scholarship money, they are considered an employee, are they not?

Of course.

Uncle Sam ain't letting someone give someone else that amount of money for free.

May be some loophole where you can claim it's for 'education'... But from my experience, in most cases if you get money from anywhere other than Grandma's birthday checks, you're going to report it because your SS# is attached.

*Not an accountant but just assuming.

 

[BigBlueFanGA]

... that could answer this question-

Wouldn't a player being given money to attend and play at a school then also incur a tax liability also on his scholarship, since he should no longer be considered an amateur athlete and his schooling is dependent on his competing in athletics? This in essence makes him a professional, since it is his participation in a sport that makes him valuable for NIL (if said athlete has not generated fame and/or income from altruistic endeavors outside of sports). Even if a player now receives just 1500$ in compensation over and above scholarship money, they are considered an employee, are they not?

@UKnCincy He either works in this field or is extremely familiar with it for some reason. He is an attorney.

 

[BigBlueFanGA]

... that could answer this question-

Wouldn't a player being given money to attend and play at a school then also incur a tax liability also on his scholarship, since he should no longer be considered an amateur athlete and his schooling is dependent on his competing in athletics? This in essence makes him a professional, since it is his participation in a sport that makes him valuable for NIL (if said athlete has not generated fame and/or income from altruistic endeavors outside of sports). Even if a player now receives just 1500$ in compensation over and above scholarship money, they are considered an employee, are they not?

Depends on who is doing the paying I would think and NIL seems like it would be separate from consideration of a scholarship. I'll also make another guess. Technically, a school is only paying what it costs to attend and participate. Since the player doesn't actually get money from the vast majority of a scholarship it seems like its a wash to me. The school pays 100K into an account in his name then the student athlete pays 100K out of that account to pay for his room, board, books, coaching, trainers........ I don't think the IRS would ever go after that due first to a lack of actual compensation and secondly due to the optics it would create.

 

[CatPatrick13]

College scholarships continue to be untaxed.

 

[Caveman Catfan]

NIL money has to be taxable income. I don’t think the scholarship evaded taxation because of amateurism. I have not thought about tax law very much in a long while, but I am sure there is a carve out for scholarships.

 

[Caveman Catfan]

Education FAQs

Here are some of the most frequently asked credits about taxes and education including deductions, credits, savings plans, tax filing, and more. 529 Plans

forst.tax

 

[StubbornPenny]

Technically you’re supposed to report illegal income like gambling winnings and bribes. If you’ll notice the recent FBI probes focused much more on the money that was changing hands than anything else.

 

[sieken]

As it is now, they are not connecting the two. The NIL dollars are specifically tied to any athlete’s performance but their popularity making them valuable. If they ever chose to go down that road it would become a mess. There a non athletes receiving scholarships that are valuable and make money because of that value created by the education. In some fields they start making money before they finish up their degree.

 

[Girthang]

Depends on who is doing the paying I would think and NIL seems like it would be separate from consideration of a scholarship. I'll also make another guess. Technically, a school is only paying what it costs to attend and participate. Since the player doesn't actually get money from the vast majority of a scholarship it seems like its a wash to me. The school pays 100K into an account in his name then the student athlete pays 100K out of that account to pay for his room, board, books, coaching, trainers........ I don't think the IRS would ever go after that due first to a lack of actual compensation and secondly due to the optics it would create.

I thought some student athletes got more for spending money now a days

 

[Girthang]

Technically the school isn't paying his NIL, therefor he isn't an employee of the university, but he does have to pay taxes on his NIL money as it is a form of income.

I'm not per se talking about the NIL itself. I'm speaking to what the NIL and incentive implies. Most NIL money is tied to a player playing for a specific program. When it is, it becomes a sponsorship/endorsement of sorts. If that sponsorship is due to someone's athletic ability in a sport, they become professionals, regardless of where they play.

Just wondering if that is going to make their athletic scholarship taxable at some point, because they aren't amateur athletes anymore. Their NIL is because of their abilities on the field, and that is what NIL is based on across the industry right now.

 

[BigBlueFanGA]

I thought some student athletes got more for spending money now a days

They do but its considered the "full cost of attendance". I doubt its taxable but I'm usually wrong a couple times before I wake up every day.

 

[UKnCincy]

... that could answer this question-

Wouldn't a player being given money to attend and play at a school then also incur a tax liability also on his scholarship, since he should no longer be considered an amateur athlete and his schooling is dependent on his competing in athletics? This in essence makes him a professional, since it is his participation in a sport that makes him valuable for NIL (if said athlete has not generated fame and/or income from altruistic endeavors outside of sports). Even if a player now receives just 1500$ in compensation over and above scholarship money, they are considered an employee, are they not?

Amateur status of college athletes has nothing to do with taxation of scholarships. Amateur status is defined by the NCAA and isn’t relevant to any of the laws or regulations that govern taxation or employment status.

But you’re asking about two issues here:

1. Does NIL money earned as a result of participating in athletics mean that athletics scholarships are now taxable?
2. Does NIL money tied to participation in sports also make a student athlete an employee of the school?

The answer to both is no (but just to be clear, I’m not a tax attorney nor am I an accountant).

For the first question, as long as scholarship money from a school is used for qualified expenses, then it’s not taxed. Any money an athlete receives directly from a school that is in excess of that or which is used for non-qualified expenses is taxable. For example, if a university pays a stipend to a graduate student, that stipend is taxable income. Any other outside income earned doesn’t change any of that, regardless of whether that outside income is tied to participation in sports at a specific school.

For the second question, we’ll use the same example of a grad student receiving a stipend. The stipend is not considered to be a wage paid for services and therefore doesn’t make a student an employee. And again, any other outside income earned by an athlete doesn’t change any of that or create an employer-employee relationship between the athlete and a school.

For a student athlete to be considered an employee of a school, it would depend upon the payments they receive directly from the school, the nature of their relationship with the school and also whether or not that arrangement meets the definition of an employee used by whatever law or regulation we’re talking about. For example, the federal government has a few different definitions of what constitutes an employee. These different definitions are similar but not exactly identical.

 

[Girthang]

Amateur status of college athletes has nothing to do with taxation of scholarships. Amateur status is defined by the NCAA and isn’t relevant to any of the laws or regulations that govern taxation or employment status.

But you’re asking about two issues here:

1. Does NIL money earned as a result of participating in athletics mean that athletics scholarships are now taxable?
2. Does NIL money tied to participation in sports also make a student athlete an employee of the school?

The answer to both is no (but just to be clear, I’m not a tax attorney nor am I an accountant).

For the first question, as long as scholarship money from a school is used for qualified expenses, then it’s not taxed. Any money an athlete receives directly from a school that is in excess of that or which is used for non-qualified expenses is taxable. For example, if a university pays a stipend to a graduate student, that stipend is taxable income. Any other outside income earned doesn’t change any of that, regardless of whether that outside income is tied to participation in sports at a specific school.

For the second question, we’ll use the same example of a grad student receiving a stipend. The stipend is not considered to be a wage paid for services and therefore doesn’t make a student an employee. And again, any other outside income earned by an athlete doesn’t change any of that or create an employer-employee relationship between the athlete and a school.

For a student athlete to be considered an employee of a school, it would depend upon the payments they receive directly from the school, the nature of their relationship with the school and also whether or not that arrangement meets the definition of an employee used by whatever law or regulation we’re talking about. For example, the federal government has a few different definitions of what constitutes an employee. These different definitions are similar but not exactly identical.

Thanks for this, @UKnCincy